$0.67 diluted EPS compared to $0.60 diluted EPS in the first quarter
of 2012. Excluding significant items and adjusting for the sale of
Advertising Solutions, EPS was $0.64 versus $0.59, up 8.5 percent

Consolidated revenues of $31.4 billion, down 1.5 percent versus
reported results for the year-earlier period, and up 0.9 percent
excluding the sale of Advertising Solutions

In the second half of 2012, RootMetrics ranked AT&T’s overall wireless
network performance 1st or tied for 1st in more
than 70 percent of the 47 markets RootMetrics surveyed where AT&T had
deployed LTE

Increasing U-verse® Gains Drive Wireline
Consumer Revenue Growth

Wireline consumer revenue growth of 2.0 percent versus the
year-earlier period; total U-verse revenues including business up
31.5 percent year over year

8.7 million total U-verse subscribers (TV and high speed Internet) in
service; 731,000 high speed Internet subscribers added, the best-ever
quarterly gain; and a net gain of 232,000 U-verse TV subscribers, the
strongest growth in nine quarters

Best total broadband net adds in two years; total wireline broadband
data ARPU up more than 9 percent year over year

Note: AT&T’s first-quarter earnings conference call will be broadcast
live via the Internet at 4:30 p.m. ET on Tuesday, April 23, 2013, at www.att.com/investor.relations.

“Our wireless network performance continues to be terrific,” said Randall
Stephenson, AT&T chairman and CEO. “And that helped drive our best
ever first quarter for smartphone
sales, improved wireless churn and strong growth in mobile data
revenues. We also posted record sales of our U-verse high-speed IP
service. Across all of these areas, we’ve built a solid foundation for
future growth in mobile Internet and IP broadband, which will only
expand as we progress with Project VIP.”

First-Quarter Financial Results

For the quarter ended March 31, 2013, AT&T’s consolidated revenues
totaled $31.4 billion, down 1.5 percent versus the year-earlier quarter
and up 0.9 percent when excluding revenues from the divested Advertising
Solutions business unit.

Compared with results for the first quarter of 2012, operating expenses
were $25.4 billion versus $25.7 billion; operating income was
$5.9 billion versus $6.1 billion; and operating income margin was
18.9 percent, compared to 19.2 percent.

First-quarter 2013 net income attributable to AT&T totaled $3.7 billion,
or $0.67 per diluted share, up from $3.6 billion, or $0.60 per diluted
share, in the year-earlier quarter. Adjusted for an income tax
settlement of 3 cents and the sale of Advertising Solutions, earnings
per share was $0.64 versus $0.59 in the year-ago quarter, an increase of
8.5 percent.

The company continues to expect capital expenditures for 2013 to be in
the $21 billion range and now expects capital expenditures for 2014 and
2015 each to be in the $20 billion range with no reduction in the
Project Velocity IP (VIP) broadband expansion. Previously, the company
expected capital spending of $22 billion annually in 2014 and 2015. The
company is achieving savings through greater integration efficiencies in
Project VIP, accelerating LTE build in 2013 and other ongoing
initiatives. As part of its Project VIP-related LTE deployment, the
company currently covers nearly 200 million POPs with its award-winning
LTE network and expects to reach nearly 90 percent of its planned 300
million POP LTE deployment by the end of 2013. AT&T’s
4G network now covers more than 292 million POPs, including LTE and
HSPA+, all with expanded backhaul to support fast data speeds.

AT&T’s overall wireless network performance – call, text, data – ranked
or tied for #1 in 14 markets of 23 surveyed year to date 2013 by
RootMetrics. In the second half of 2012, RootMetrics ranked AT&T’s
overall wireless network performance 1st or tied for 1st
in more than 70 percent of the 47 markets RootMetrics surveyed where
AT&T had deployed LTE. RootMetrics surveyed a total of 77 markets in the
second half of 2012.

Share Repurchases

During the quarter, the AT&T board of directors approved a third 300
million share repurchase authorization. Since the beginning of 2012, the
company has been buying back shares under two previous 300 million share
repurchase authorizations. The first repurchase authorization was
completed in the fourth quarter of 2012. During the first quarter, the
company repurchased an additional 168 million shares for $5.9 billion
under the second authorization. At the end of the quarter, about 61
million shares remained on the second authorization which is expected to
be completed in the second quarter. The company expects to make future
repurchases opportunistically, which will slow the pace of buybacks
compared to recent activity.

Wireless Revenues Continue Solid Growth. Total wireless revenues,
which include equipment sales, were up 3.4 percent year over year to
$16.7 billion. Wireless service revenues increased 3.4 percent in the
first quarter, to $15.1 billion. Wireless data revenues increased
21.0 percent from the year-earlier quarter to $5.1 billion.
First-quarter wireless operating expenses totaled $12.0 billion, up
3.2 percent versus the year-earlier quarter, and wireless operating
income was $4.7 billion, up 4.1 percent year over year.

Tablets Drive Postpaid Gains. AT&T posted a net increase in total
wireless subscribers of 291,000 in the first quarter. Subscriber
additions for the quarter included postpaid net adds of 296,000.
Postpaid net adds reflect 365,000 postpaid tablets added in the quarter.
Connected device net adds were 431,000. Prepaid had a net loss of
184,000 subscribers primarily due to declines in session-based tablets
and declines in GoPhone. Reseller had a net loss of 252,000 primarily
due to our resellers’ rationalization of their low or no usage accounts.

Smartphone Base Continues to Expand. AT&T added 1.2 million
postpaid smartphone subscribers in the first quarter. At the end of the
quarter, 72 percent, or 48.3 million, of AT&T’s postpaid phone
subscribers had smartphones, up from 61 percent, or 41.2 million, a year
earlier. The company sold a first-quarter record 6.0 million
smartphones. Smartphones represented 81 percent of postpaid device sales
and 88 percent of postpaid phone sales in the quarter. AT&T’s ARPU for
smartphones is about twice that of non-smartphone subscribers, and about
90 percent of postpaid subscribers are on FamilyTalk®,
Mobile Share or business plans. Churn levels for these subscribers are
significantly lower than for other postpaid subscribers. About 60
percent of AT&T’s postpaid smartphone customers now use a 4G-capable
device, with more than half of those using LTE devices.

Almost 10 Million Postpaid Subscribers on Mobile Share Plans. The
number of subscribers on usage-based data plans (tiered data and
Mobile Share plans) continues to increase. Almost 70 percent, or
33.5 million, of postpaid smartphone subscribers are on usage-based data
plans. This compares to 61 percent, or 25.1 million, a year ago and 38
percent two years ago. Three-quarters of customers on tiered data plans
have chosen the higher-priced plans.

Almost 10 million connections, or about 14 percent of postpaid
subscribers, are on Mobile Share plans. The number of Mobile Share
accounts reached 3.3 million in the first quarter with an average of
about three devices per account. Take rates on the higher-data plans
continue to be much stronger than expected with more than a quarter of
Mobile Share accounts choosing 10 gigabytes or higher. More than 15
percent of new Mobile Share subscribers came from unlimited plans in the
quarter. Since the inception of Mobile Share, more than 1 million
connections have come from unlimited plans.

Postpaid Churn Improves. Postpaid churn was 1.04 percent, down
from 1.10 percent in the first quarter a year ago, and from 1.19 percent
in the fourth quarter of 2012. Total churn also was down: 1.38 percent
versus 1.47 percent in the first quarter of 2012 and 1.42 percent in the
fourth quarter of 2012.

Wireless Margins Expand with Strong Smartphone Sales. First-quarter
wireless margins grew, driven by improved operating efficiencies and
further revenue gains from the company’s high-quality smartphone
subscribers. AT&T’s first-quarter wireless operating income margin was
28.0 percent versus 27.8 percent in the year-earlier quarter. AT&T’s
wireless EBITDA service margin was 43.2 percent, compared with 42.3
percent in the first quarter of 2012. (EBITDA service margin is
operating income before depreciation and amortization, divided by total
service revenues.)

WIRELINE OPERATIONAL HIGHLIGHTS

AT&T’s first-quarter wireline results were led by strong U-verse
TV and high speed Internet gains, solid wireline consumer revenue
growth and the best broadband gains in eight quarters. Highlights
included:

Consumer Revenue Gains Help Offset Business Pressure. Total
first-quarter wireline revenues were $14.7 billion, down 1.8 percent
versus the year-earlier quarter and down 1.8 percent sequentially.
First-quarter wireline operating expenses were $13.0 billion, down 1.4
percent versus the first quarter of 2012 and down 0.8 percent
sequentially. AT&T’s wireline operating income totaled $1.6 billion,
down 5.1 percent from the first quarter of 2012. Positive consumer
revenue trends helped to partially offset declines in revenues from
business customers. First-quarter wireline operating income margin was
11.1 percent, compared to 11.5 percent in the year-earlier quarter.

Best-Ever High Speed IP Broadband Growth. Total U-verse revenues
grew 31.5 percent year over year and were up 5.0 percent versus the
fourth quarter of 2012. Total U-verse subscribers (TV and high speed
Internet) reached 8.7 million in the first quarter. U-verse TV added
232,000 subscribers, its best net gain in nine quarters, to reach
4.8 million in service. U-verse High Speed Internet delivered a
best-ever net gain of 731,000 subscribers to reach a total of
8.4 million. Overall, the company added 124,000 wireline broadband
subscribers, the best quarterly increase in eight quarters. Total
broadband ARPU was up more than 9 percent year over year. Total U-verse
High Speed Internet subscribers now represent more than half of all
wireline broadband subscribers.

Consumer Revenues Continue Growth. Revenues from residential
customers totaled $5.5 billion, an increase of 2.0 percent versus the
first quarter a year ago. Continued strong growth in consumer IP data
services in the first quarter more than offset lower revenues from voice
and legacy products. U-verse continues to transform wireline consumer.
U-verse revenues now represent 48 percent of wireline consumer revenues,
up from 38 percent in the year-earlier quarter and 27 percent two years
ago. Consumer U-verse revenues grew 30.8 percent year over year and were
up 4.9 percent versus the fourth quarter of 2012. Increased AT&T U-verse
penetration and a significant number of subscribers purchasing multiple
services drove 15.9 percent year-over-year growth in IP revenues from
residential customers (broadband, U-verse TV and U-verse Voice).

More than 56 percent of U-verse broadband subscribers have a plan
delivering speeds up to 10 Mbps or higher — up from 50 percent in the
year-ago quarter. More than 90 percent of new U-verse TV customers also
signed up for U-verse High Speed Internet in the first quarter. About 70
percent of AT&T U-verse TV subscribers take three or four services from
AT&T. ARPU for U-verse triple-play customers continues to be more than
$170. U-verse TV penetration of customer locations continues to grow and
was at 19.4 percent at the end of the first quarter.

Strategic Business Services Lead Wireline Business. Total
business revenues were $8.9 billion, down 3.4 percent versus the
year-earlier quarter, and business service revenues declined 3.5 percent
year over year. Both reflected a slow economy and weak government and
business spending. Overall, declines in legacy products were partially
offset by continued double-digit growth in strategic business services.
Revenues from these services, the next-generation capabilities that lead
AT&T’s most advanced business solutions — including VPN, Ethernet,
hosting and other advanced IP services — grew 10.8 percent versus the
year-earlier quarter. These services represent a $7.9 billion annualized
revenue stream.

AT&T products and services are provided or offered by subsidiaries
and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.

About AT&T

AT&T Inc. (NYSE:T) is a premier communications holding company and one
of the most honored companies in the world. Its subsidiaries and
affiliates – AT&T operating companies – are the providers of AT&T
services in the United States and internationally. With a powerful array
of network resources that includes the nation’s largest 4G network, AT&T
is a leading provider of wireless, Wi-Fi, high speed Internet, voice and
cloud-based services. A leader in mobile Internet, AT&T also offers the
best wireless coverage worldwide of any U.S. carrier, offering the most
wireless phones that work in the most countries. It also offers advanced
TV services under the AT&T U-verse® and AT&T │DIRECTV
brands. The company’s suite of IP-based business communications services
is one of the most advanced in the world.

Information set forth in this news release contains financial
estimates and other forward-looking statements that are subject to risks
and uncertainties, and actual results may differ materially. A
discussion of factors that may affect future results is contained in
AT&T’s filings with the Securities and Exchange Commission. AT&T
disclaims any obligation to update or revise statements contained in
this news release based on new information or otherwise. This news
release may contain certain non-GAAP financial measures. Reconciliations
between the non-GAAP financial measures and the GAAP financial measures
are available on the company’s website at www.att.com/investor.relations.
Accompanying financial statements follow.

NOTE: Traditional phones include those devices that are mobile
in nature and voice calls can be made and do not include computing
devices or mobile home phones.

NOTE: EBITDA is defined as operating income before
depreciation and amortization. EBITDA differs from Segment Operating
Income (loss), as calculated in accordance with U.S. generally accepted
accounting principles (GAAP), in that it excludes depreciation and
amortization. EBITDA does not give effect to cash used for debt service
requirements and thus does not reflect available funds for
distributions, reinvestment or other discretionary uses. EBITDA is not
presented as an alternative measure of operating results or cash flows
from operations, as determined in accordance with GAAP. Our calculation
of EBITDA, as presented, may differ from similarly titled measures
reported by other companies.

NOTE: Free cash flow is defined as cash from operations minus
capital expenditures. We believe this metric provides useful information
to our investors because management regularly reviews free cash flow as
an important indicator of how much cash is generated by normal business
operations, including capital expenditures, and makes decisions based on
it. Management also views it as a measure of cash available to pay debt
and return cash to shareowners.

NOTE: Adjusted Operating Income, Adjusted Operating Expenses,
Adjusted Operating Revenues, Adjusted Operating Income Margin and
Adjusted diluted EPS are non-GAAP financial measures calculated by
excluding from operating revenues, operating expenses and equity in net
income of affiliates certain significant items that are non-operational
or non-recurring in nature, including dispositions. Management believes
that these measures provide relevant and useful information to investors
and other users of our financial data in evaluating the effectiveness of
our operations and underlying business trends.Adjusted Operating
Income, Adjusted Operating Expenses, Adjusted Operating Revenues,
Adjusted Operating Income Margin and Adjusted diluted EPS should be
considered in addition to, but not as a substitute for, other measures
of financial performance reported in accordance with GAAP. Our
calculations of Adjusted Operating Income and Adjusted diluted EPS, as
presented, may differ from similarly titled measures reported by other
companies.

Financial Data

AT&T Inc.

Consolidated Statements of Income

Dollars in millions except per share amounts

Unaudited

Three Months Ended

3/31/2013

3/31/2012

% Chg

Operating Revenues

$

31,356

$

31,822

-1.5

%

Operating Expenses

Cost of services and sales (exclusive of depreciation and
amortization shown separately below)

12,554

12,817

-2.1

%

Selling, general and administrative

8,333

8,344

-0.1

%

Depreciation and amortization

4,529

4,560

-0.7

%

Total Operating Expenses

25,416

25,721

-1.2

%

Operating Income

5,940

6,101

-2.6

%

Interest Expense

827

859

-3.7

%

Equity in Net Income of Affiliates

185

223

-17.0

%

Other Income (Expense) - Net

32

52

-38.5

%

Income Before Income Taxes

5,330

5,517

-3.4

%

Income Tax Expense

1,557

1,865

-16.5

%

Net Income

3,773

3,652

3.3

%

Less: Net Income Attributable to Noncontrolling Interest

(73

)

(68

)

-7.4

%

Net Income Attributable to AT&T

$

3,700

$

3,584

3.2

%

Basic Earnings Per Share Attributable to AT&T

$

0.67

$

0.60

11.7

%

Weighted Average Common Shares Outstanding (000,000)

5,513

5,918

-6.8

%

Diluted Earnings Per Share Attributable to AT&T

$

0.67

$

0.60

11.7

%

Weighted Average Common Shares Outstanding with Dilution (000,000)

5,530

5,940

-6.9

%

Financial Data

AT&T Inc.

Statements of Segment Income

Dollars in millions

Unaudited

Three Months Ended

Wireless

3/31/2013

3/31/2012

% Chg

Segment Operating Revenues

Data

$

5,125

$

4,235

21.0

%

Voice, text and other service

9,937

10,331

-3.8

%

Equipment

1,629

1,570

3.8

%

Total Segment Operating Revenues

16,691

16,136

3.4

%

Segment Operating Expenses

Operations and support

10,180

9,978

2.0

%

Depreciation and amortization

1,835

1,666

10.1

%

Total Segment Operating Expenses

12,015

11,644

3.2

%

Segment Operating Income

4,676

4,492

4.1

%

Equity in Net Income (Loss) of Affiliates

(18

)

(13

)

-38.5

%

Segment Income

$

4,658

$

4,479

4.0

%

Segment Operating Income Margin

28.0

%

27.8

%

Wireline

Segment Operating Revenues

Data

$

8,162

$

7,800

4.6

%

Voice

5,306

5,892

-9.9

%

Other

1,187

1,237

-4.0

%

Total Segment Operating Revenues

14,655

14,929

-1.8

%

Segment Operating Expenses

Operations and support

10,335

10,402

-0.6

%

Depreciation and amortization

2,688

2,808

-4.3

%

Total Segment Operating Expenses

13,023

13,210

-1.4

%

Segment Operating Income

1,632

1,719

-5.1

%

Equity in Net Income of Affiliates

1

-

-

Segment Income

$

1,633

$

1,719

-5.0

%

Segment Operating Income Margin

11.1

%

11.5

%

Advertising Solutions

Segment Operating Revenues

$

-

$

744

-

Segment Operating Expenses

Operations and support

-

547

-

Depreciation and amortization

-

77

-

Total Segment Operating Expenses

-

624

-

Segment Income

$

-

$

120

-

Segment Income Margin

-

16.1

%

Other

Segment Operating Revenues

$

10

$

13

-23.1

%

Segment Operating Expenses

378

243

55.6

%

Segment Operating Income (Loss)

(368

)

(230

)

-60.0

%

Equity in Net Income of Affiliates

202

236

-14.4

%

Segment Income (Loss)

$

(166

)

$

6

-

Financial Data

AT&T Inc.

Consolidated Balance Sheets

Dollars in millions

03/31/2013

12/31/2012

Unaudited

Assets

Current Assets

Cash and cash equivalents

$

3,875

$

4,868

Accounts receivable - net of allowances for doubtful accounts of
$547 and $547

12,100

12,657

Prepaid expenses

1,021

1,035

Deferred income taxes

980

1,036

Other current assets

2,396

3,110

Total current assets

20,372

22,706

Property, Plant and Equipment - Net

109,702

109,767

Goodwill

69,772

69,773

Licenses

53,507

52,352

Customer Lists and Relationships - Net

1,190

1,391

Other Intangible Assets - Net

5,022

5,032

Investments in and Advances to Equity Affiliates

4,998

4,581

Other Assets

6,431

6,713

Total Assets

$

270,994

$

272,315

Liabilities and Stockholders’ Equity

Current Liabilities

Debt maturing within one year

$

3,446

$

3,486

Accounts payable and accrued liabilities

17,523

20,494

Advanced billing and customer deposits

4,167

4,225

Accrued taxes

2,210

1,026

Dividends payable

2,440

2,556

Total current liabilities

29,786

31,787

Long-Term Debt

70,686

66,358

Deferred Credits and Other Noncurrent Liabilities

Deferred income taxes

28,918

28,491

Postemployment benefit obligation

41,663

41,392

Other noncurrent liabilities

11,603

11,592

Total deferred credits and other noncurrent liabilities

82,184

81,475

Stockholders’ Equity

Common stock

6,495

6,495

Additional paid-in capital

90,940

91,038

Retained earnings

23,787

22,481

Treasury stock

(38,568

)

(32,888

)

Accumulated other comprehensive income

5,344

5,236

Noncontrolling interest

340

333

Total stockholders’ equity

88,338

92,695

Total Liabilities and Stockholders’ Equity

$

270,994

$

272,315

Financial Data

AT&T Inc.

Consolidated Statements of Cash Flows

Dollars in millions

Unaudited

Three Months Ended March 31,

2013

2012

Operating Activities

Net income

$

3,773

$

3,652

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization

4,529

4,560

Undistributed earnings from investments in equity affiliates

(185

)

(223

)

Provision for uncollectible accounts

262

328

Deferred income tax expense and noncurrent unrecognized tax
benefits

509

337

Net (gain) loss from sale of investments, net of impairments

(11

)

(9

)

Changes in operating assets and liabilities:

Accounts receivable

295

73

Other current assets

864

1,120

Accounts payable and accrued liabilities

(1,675

)

(1,655

)

Other - net

(162

)

(338

)

Total adjustments

4,426

4,193

Net Cash Provided by Operating Activities

8,199

7,845

Investing Activities

Construction and capital expenditures:

Capital expenditures

(4,252

)

(4,261

)

Interest during construction

(66

)

(65

)

Acquisitions, net of cash acquired

(1,045

)

(433

)

Dispositions

5

16

Sales (purchases) of securities, net

-

5

Other

1

1

Net Cash Used in Investing Activities

(5,357

)

(4,737

)

Financing Activities

Net change in short-term borrowings with original maturities of
three months or less

274

-

Issuance of other short-term borrowings

1,474

-

Issuance of long-term debt

4,875

2,986

Repayment of long-term debt

(1,791

)

(2,204

)

Purchase of treasury stock

(5,911

)

(2,066

)

Issuance of treasury stock

56

218

Dividends paid

(2,502

)

(2,606

)

Other

(310

)

(130

)

Net Cash Used in Financing Activities

(3,835

)

(3,802

)

Net decrease in cash and cash equivalents

(993

)

(694

)

Cash and cash equivalents beginning of year

4,868

3,045

Cash and Cash Equivalents End of Period

$

3,875

$

2,351

Financial Data

AT&T Inc.

Supplementary Operating and Financial Data

Dollars in millions except per share amounts, subscribers and
connections in (000s)

Unaudited

Three Months Ended

3/31/2013

3/31/2012

% Chg

Wireless

Volumes

Total

107,251

103,940

3.2

%

Postpaid

70,749

69,403

1.9

%

Prepaid

7,104

7,368

-3.6

%

Reseller

14,702

13,869

6.0

%

Connected Devices

14,696

13,300

10.5

%

Wireless Net Adds

Total

291

726

-59.9

%

Postpaid

296

187

58.3

%

Prepaid

(184

)

125

-

Reseller

(252

)

184

-

Connected Devices

431

230

87.4

%

M&A Activity, Partitioned Customers and Other Adjs.

3

(33

)

-

Wireless Churn

Postpaid Churn

1.04

%

1.10

%

-6 BP

Total Churn

1.38

%

1.47

%

-9 BP

Other

Licensed POPs (000,000)

317

313

1.3

%

Wireline

Voice

Total Wireline Voice Connections1

31,163

35,206

-11.5

%

Net Change

(1,021

)

(1,126

)

9.3

%

Broadband

Total Wireline Broadband Connections

16,514

16,530

-0.1

%

Net Change

124

103

20.4

%

Video

Total U-verse Video Connections

4,768

3,991

19.5

%

Net Change

232

200

16.0

%

Consumer Revenue Connections

Broadband2

14,686

14,595

0.6

%

U-verse Video Connections1

4,755

3,983

19.4

%

Voice1,3

17,960

20,534

-12.5

%

Total Consumer Revenue Connections1

37,401

39,112

-4.4

%

Net Change

(266

)

(394

)

32.5

%

AT&T Inc.

Construction and capital expenditures

Capital expenditures

$

4,252

$

4,261

-0.2

%

Interest during construction

$

66

$

65

1.5

%

Dividends Declared per Share

$

0.45

$

0.44

2.3

%

End of Period Common Shares Outstanding (000,000)

5,423

5,875

-7.7

%

Debt Ratio4

45.6

%

38.4

%

720 BP

Total Employees

243,340

252,330

-3.6

%

1 Prior year amounts restated to conform to current
period reporting methodology.

3 Includes consumer U-verse Voice over Internet
Protocol connections of 3,120 as of March 31, 2013.

4 Total long-term debt plus debt maturing within one
year divided by total debt plus total stockholders’ equity.

Note: For the end of 1Q13, total switched access lines were
28,043, retail business switched access lines totaled 11,185, and
wholesale, national mass markets and coin switched access lines
totaled 2,018. Restated switched access lines do not include ISDN
lines.

Financial Data

AT&T Inc.

Non-GAAP Wireless Reconciliation

Wireless Segment EBITDA

Dollars in millions

Unaudited

Three Months Ended

3/31/12

6/30/12

9/30/12

12/31/12

3/31/13

Segment Operating Revenues

Data

4,235

4,471

4,686

4,905

5,125

Voice, text and other service

10,331

10,294

10,220

10,044

9,937

Equipment

1,570

1,588

1,726

2,693

1,629

Total Segment Operating Revenues

16,136

16,353

16,632

17,642

16,691

Segment Operating Expenses

Operations and support

9,978

9,590

10,432

13,296

10,180

Depreciation and amortization

1,666

1,696

1,730

1,781

1,835

Total Segment Operating Expenses

11,644

11,286

12,162

15,077

12,015

Segment Operating Income

4,492

5,067

4,470

2,565

4,676

Segment Operating Income Margin

27.8

%

31.0

%

26.9

%

14.5

%

28.0

%

Plus: Depreciation and amortization

1,666

1,696

1,730

1,781

1,835

EBITDA

6,158

6,763

6,200

4,346

6,511

EBITDA as a % of Service Revenues1

42.3

%

45.8

%

41.6

%

29.1

%

43.2

%

EBITDA is defined as Operating Income Before Depreciation and
Amortization.

1 Service revenues is defined as Wireless data and voice,
text and other service revenues.

Free cash flow is defined as cash from operations minus
construction and capital expenditures. Free cash flow after
dividends is defined as cash from operations minus construction,
capital expenditures and dividends. We believe these metrics
provide useful information to our investors because management
regularly reviews free cash flow as an important indicator of how
much cash is generated by normal business operations, including
capital expenditures, and makes decisions based on it. Management
also views free cash flow as a measure of cash available to pay
debt and return cash to shareowners.

Financial Data

AT&T Inc.

Non-GAAP Consolidated Reconciliation

Annualized Net-Debt-to-EBITDA Ratio

Dollars in millions

Unaudited

3/31/13

2013 YTD

Operating Revenues

$

31,356

$

31,356

Operating Expenses

25,416

25,416

Total Operating Income

5,940

5,940

Add Back Depreciation and Amortization

4,529

4,529

Total Consolidated EBITDA

10,469

10,469

Annualized Consolidated EBITDA*

41,876

End-of-period current debt

3,446

End-of-period long-term debt

70,686

Total End-of-Period Debt

74,132

Less Cash and Cash Equivalents

3,875

Net Debt Balance

70,257

Annualized Net-Debt-to-EBITDA Ratio

1.68

Net Debt to EBITDA ratios are non-GAAP financial measures frequently
used by investors and credit rating agencies and management believes
these measures provide relevant and useful information to investors
and other users of our financial data. The Net Debt to EBITDA ratio
is calculated by dividing the Net Debt by annualized EBITDA. Net
Debt is calculated by subtracting cash and cash equivalents from the
sum of debt maturing within one year and long-term debt. Annualized
EBITDA is calculated by annualizing the year-to-date EBITDA.

Financial Data

AT&T Inc.

Non-GAAP Financial Reconciliation

Adjusted Operating Revenues

Dollars in Millions

Unaudited

Three Months Ended

March 31,

2012

2013

Reported Operating Revenues

$

31,822

$

31,356

Adjustments:

Removal of Advertising Solutions

(744

)

-

Adjusted Operating Revenues

$

31,078

$

31,356

Year-over-year growth - Adjusted

0.9

%

Adjusted Operating Revenues is a non-GAAP financial measure
calculated by excluding from operating revenues significant items
that are non-operational or non-recurring in nature, including
dispositions. Management believes that these measures provide
relevant and useful information to investors and other users of
our financial data in evaluating the effectiveness of our
operations and underlying business trends.

Adjusted Operating Revenues should be considered in addition to,
but not as a substitute for, other measures of financial
performance reported in accordance with GAAP. Our calculations of
Adjusted Operating Revenues may differ from similarly titled
measures reported by other companies.

Financial Data

AT&T Inc.

Non-GAAP Financial Reconciliation

Adjusted Diluted EPS

Unaudited

Three Months Ended

March 31,

2012

2013

Reported Diluted EPS

$

0.60

$

0.67

Adjustments:

Removal of Advertising Solutions

(0.01

)

-

Income Tax Settlement

-

(0.03

)

Adjusted Diluted EPS

$

0.59

$

0.64

Year-over-year growth - Adjusted

8.5

%

Weighted Average Common Shares Outstanding with Dilution (000,000)

5,940

5,530

Adjusted diluted EPS is a non-GAAP financial measure calculated by
excluding from operating revenues, operating expenses and equity
in net income of affiliates certain significant items that are
non-operational or non-recurring in nature, including
dispositions. Management believes that this measure provides
relevant and useful information to investors and other users of
our financial data in evaluating the effectiveness of our
operations and underlying business trends.

Adjusted diluted EPS should be considered in addition to, but not
as a substitute for, other measures of financial performance
reported in accordance with GAAP. Our calculation of Adjusted
diluted EPS, as presented, may differ from similarly titled
measures reported by other companies.

EBITDA DISCUSSION

For AT&T, EBITDA is defined as operating income before depreciation and
amortization. EBITDA service margin is calculated as EBITDA divided by
service revenues. EBITDA differs from Segment Operating Income (Loss),
as calculated in accordance with GAAP, in that it excludes depreciation
and amortization. EBITDA does not give effect to cash used for debt
service requirements and thus does not reflect available funds for
distributions, reinvestment or other discretionary uses. EBITDA is not
presented as an alternative measure of operating results or cash flows
from operations, as determined in accordance with generally accepted
accounting principles. Our calculation of EBITDA, as presented, may
differ from similarly titled measures reported by other companies.

We believe these measures are relevant and useful information to our
investors as they are part of AT&T Mobility’s internal management
reporting and planning processes and are important metrics that AT&T
Mobility’s management uses to evaluate the operating performance of its
regional operations. These measures are used by management as a gauge of
AT&T Mobility’s success in acquiring, retaining and servicing
subscribers because we believe these measures reflect AT&T Mobility’s
ability to generate and grow subscriber revenues while providing a high
level of customer service in a cost-effective manner. Management also
uses these measures as a method of comparing AT&T Mobility’s performance
with that of many of its competitors. The financial and operating
metrics which affect EBITDA include the key revenue and expense drivers
for which AT&T Mobility’s operating managers are responsible and upon
which we evaluate their performance.

EBITDA does not give effect to cash used for debt service requirements
and thus does not reflect available funds for distributions,
reinvestment or other discretionary uses. EBITDA excludes other income
(expense) – net, net income attributable to noncontrolling interest and
equity in net income (loss) of affiliates, as these do not reflect the
operating results of AT&T Mobility’s subscriber base and its national
footprint that AT&T Mobility utilizes to obtain and service its
customers. Equity in net income (loss) of affiliates represents AT&T
Mobility’s proportionate share of the net income (loss) of affiliates in
which it exercises significant influence, but does not control. As AT&T
Mobility does not control these entities, our management excludes these
results when evaluating the performance of our primary operations.
EBITDA excludes interest expense and the provision for income taxes.
Excluding these items eliminates the expenses associated with its
capitalization and tax structures. Finally, EBITDA excludes depreciation
and amortization, in order to eliminate the impact of capital
investments.

We believe EBITDA as a percentage of service revenues to be a more
relevant measure of AT&T Mobility’s operating margin than EBITDA as a
percentage of total revenue. AT&T Mobility generally subsidizes a
portion of its handset sales, all of which are recognized in the period
in which AT&T Mobility sells the handset. This results in a
disproportionate impact on its margin in that period. Management views
this equipment subsidy as a cost to acquire or retain a subscriber,
which is recovered through the ongoing service revenue that is generated
by the subscriber. AT&T Mobility also uses service revenues to calculate
margin to facilitate comparison, both internally and externally with its
competitors, as they calculate their margins using service revenues as
well.

There are material limitations to using these non-GAAP financial
measures. EBITDA and EBITDA service margin, as we have defined them, may
not be comparable to similarly titled measures reported by other
companies. Furthermore, these performance measures do not take into
account certain significant items, including depreciation and
amortization, interest expense, tax expense and equity in net income
(loss) of affiliates, which directly affect AT&T Mobility’s net income.
Management compensates for these limitations by carefully analyzing how
its competitors present performance measures that are similar in nature
to EBITDA as we present it, and considering the economic effect of the
excluded expense items independently as well as in connection with its
analysis of net income as calculated in accordance with GAAP. EBITDA and
EBITDA service margin should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in
accordance with GAAP.

FREE CASH FLOW DISCUSSION

Free cash flow is defined as cash from operations minus construction and
capital expenditures. Free cash flow after dividends is defined as cash
from operations minus construction, capital expenditures and dividends.
Free cash flow yield is defined as cash from continuing operations less
construction and capital expenditures as a percentage of market
capitalization computed on the last trading day of the quarter. Market
capitalization is computed by multiplying the end of period stock price
by the end of period shares outstanding. We believe these metrics
provide useful information to our investors because management monthly
reviews free cash flow as an important indicator of how much cash is
generated by normal business operations, including capital expenditures,
and makes decisions based on it. Management also views it as a measure
of cash available to pay debt and return cash to shareowners.

NET DEBT TO EBITDA DISCUSSION

Net Debt to EBITDA ratios are non-GAAP financial measures frequently
used by investors and credit rating agencies and management believes
these measures provide relevant and useful information to investors and
other users of our financial data. The Net Debt to EBITDA ratio is
calculated by dividing the Net Debt by annualized EBITDA. Net Debt is
calculated by subtracting cash and cash equivalents from the sum of debt
maturing within one year and long-term debt. Annualized EBITDA is
calculated by annualizing the year-to-date EBITDA.

ADJUSTING ITEMS DISCUSSION

Adjusted Operating Revenues and Adjusted diluted EPS are non-GAAP
financial measures calculated by excluding from operating revenues and
income tax expense certain significant items that are non-operational or
non-recurring in nature, including dispositions. Management believes
that these measures provide relevant and useful information to investors
and other users of our financial data in evaluating the effectiveness of
our operations and underlying business trends.

Adjusted Operating Revenues and Adjusted diluted EPS should be
considered in addition to, but not as a substitute for, other measures
of financial performance reported in accordance with GAAP. Our
calculations of Adjusted diluted EPS, as presented, may differ from
similarly titled measures reported by other companies.